Investment Strategy

The Magni Approach is Built on Proprietary Research on Governance

  • Governance establishes how a country or company should operate
  • Honesty and transparency are the keys to good governance
  • Good governance is revealed by the actual adherence to rules and regulations
  • Only Magni measures this behavior vs intent; it is what differentiates Magni from other research organizations
  • Studies have shown that good governance (“G”) is the driver of performance and leads to a better environmental (“E”) and social (“S”) performance in responsible investing portfolios

The Magni Difference

Traditional investment analysis uses the easily accessible and reported data to make investment decisions. This is akin to the visible part of an iceberg. Magni researches the hard to find, mostly overlooked information. This information is like the submerged portion of an iceberg. Such research can provide crucial insights and have more impact.

International equities iceberg metaphor

Country Governance Portfolios

  • We research the accounting, legal, regulatory and economic infrastructure of all investable countries in the world and derive a Magni Country Score and rank.
  • We assess the transparency and honesty of each country’s infrastructure. When countries adhere to transparent and honest practices in these systems, the result is an environment for effective corporate governance.
  • We apply the Sustainable Wealth Creation principles. These principles have shown that countries with effective corporate governance outperform those that do not.
  • We believe that Countries Matter™ when constructing international portfolios and country selection is more important than security selection.

Sustainable Wealth Creation Principles

Sustainable Wealth Creation principles were created to enable the collection and organization of country level data about the respective business infrastructures. The principles are based on widely-accepted economic concepts. Information created by assessing country-level adherence to the principles can be used when making investment decisions. Sustainable Wealth Creation principles address three very important questions:

  • Do financial statements accurately reflect a company’s position?
  • Are shareholders protected and are there adequate controls?
  • Can company leadership make decisions confidently…and without interference from a corrupt government?

Sustainable Wealth Creation principles help answer these important questions by investigating the accounting, legal, regulatory, adjudicative, and economic infrastructures of a country.

Sustainable wealth creation principles for global wealth management

 

Corporate Governance Portfolios

  • Measuring a company’s behavior and actions provide the best indicators of good corporate governance.
  • Most existing metrics of governance are based on structural items that just “check the box” (e.g., board diversity, compensation)
  • While structural factors are a part of understanding the role of governance in a company, these may not be a reliable indicator of behavior of the company.
  • Information from company-produced brochures (especially “Sustainability Reports”) show what companies are marketing, but not what they are doing
  • Good governance is more than just researching the behavior with each company’s relationship with its shareholders and employees, it also should assess the relationships with their customers, suppliers, competitors, and community in which it operates.

Sustainable Value Creation Principles

Magni established the Sustainable Value Creation principles through a license for the Arcturus model for corporate governance best practices from the Caux Round Table (CRT) for Moral Capitalism. The CRT is an international network of principled business leaders working to promote a moral capitalism. Magni’s Corporate Governance Assessment is used to evaluate all companies in the S&P 500 Index for good governance. This screen is also the foundation for our Catholic Values and Islamic Stewardship portfolios which integrate guidance from the respective faiths.

The Magni assessment measures corporate governance behaviors and includes “S” behaviors as well, including:

  • Effectiveness of the board in overseeing management and serving the interests of the shareholders
  • Engagement of all employees in skills development and career growth
  • Extent to which customers receive the desired benefits from the company’s offerings
  • Breadth and strength of supplier relationships, including the degree of collaboration
  • Ethical treatment of competitors, including competitive property rights
  • Engagement in the communities in which the company operates
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